x Abu Dhabi, UAEWednesday 26 July 2017

In a roundabout way, the swings were obvious play

While most 'how-to' books might lead you in the wrong direction, taking advantage of the movement from one day's close to the next days opening, might be the way to go.

Is it just me, or are most "how-to" and self-help books transparently little more than a repackaging of hoary old chestnuts and attractively redecorated restatements of the blindingly obvious - and, thus, a spectacular waste of money, time and trees? Take The Art of War, by the much-vaunted (though quite possibly entirely fabricated) Sun Tzu, supposedly written some time around 500BC. This treatise is so chock full of transparently trite truisms that Chinese armies of the period must surely have been commanded by halfwits.

Despite - or, perhaps, because of - the superficial nature of the advice contained in The Art of War, it has spawned a self-help sub-category all its own, generating books beloved of everyone from students (who can't be expected to know any better) to captains of industry (who can. The Art of War for Managers? Oh, please). Next time you are in combat, Grasshopper, try this Sun Tzu tip: "You can be sure of succeeding in your attacks if you only attack places which are undefended".

Uh-huh. And its painfully obvious corollary: "You can ensure the safety of your defence if you only hold positions that cannot be attacked". Brilliant. Frankly, if you are a soldier and you find the advice contained in The Art of War helpful, you should immediately check your pulse. You are probably dead already. In some areas of life, however, it pays to take advice, no matter how apparently obvious. There are, of course, entire libraries of books dedicated to turning the likes of me into the Gordon Gecko of day trading - The Guts and Glory of Day Trading, A Beginner's Guide to Day Trading Online, The Complete Guide to Day Trading, Financial Freedom Through Electronic Day Trading, The Ultimate Day Trader and, inevitably, Day Trading for Dummies.

Each contains a core of sound advice - never borrow to invest, don't invest more than you can afford to lose, set a loss limit and stick to it - but many also offer cunning strategies that simply might not occur to the newbie. All are written to appeal to the bored office worker who dreams of the freedom of working from home and covering the mortgage with just a few deft clicks of the mouse - but a surprising proportion also seem to be pitched at those who fantasise about the freedom to work clad in nought but their smalls.

"Who wouldn't want to make US$5,000 [Dh18,360] a week from home, sitting in his or her underwear?" asks Josh Di Pietro in The Truth About Day Trading Stocks. "Working from home in your underpants always sounds wonderful when you read about it in the adverts," cautions day-trading coach Harvey Walsh (putting a fresh spin on the title of his course, Day Trading Freedom), "but the reality can be quite a shock."

Especially for the cleaner, I imagine. Frankly, it's not for me and I'd like to reassure readers right now that both underwear and trousers were worn - and at the same time - throughout the writing of this column. That said, despite his scant regard for sartorial propriety, Di Pietro is among those trading gurus who offer sound advice, even though some of it might sound like it is fresh from the Sun Tzu School of The Bleeding Obvious. The difference is that it has a practical application.

Take "Pick stocks that display tradable intraday price swings", with its corollary, "Stay away from charts that exhibit intraday flat patterns". In short-term volatility, in other words, can be found potential rich pickings. Scalping stocks several times a day can reap instant rewards but is a costly business if, like me, you pay a fee for each trade, and requires being glued to the screen for eight hours at a stretch.

Another way to go is to lurk around the fringes of a stock market's natural rhythms, pouncing on the swings from one day's close to the next day's opening, or from the end of one week to the beginning of the next. Public holidays, when a market might be closed for three consecutive days, create an even bigger window of opportunity. Anticipatory pressure (read "greed") often seems to build behind stocks that close up before the weekend - and that pressure is only intensified if the weekend is extended by an extra day.

This week, the London Stock Exchange was closed on Monday for a public holiday. It was time to test my mettle, and Di Pietro's advice. My best-performing stock for several weeks now has been Old Mutual, the insurance company. A small dip to about 123 pence per share at about lunchtime during the last day of trading, the Friday, was followed by a climb to 127.4p by the close of play. This also represented an impressive gain per share of 14.4 per cent since I first invested in this stock on July 20. In other words, if I had put my entire fictional stake of £15,000 (Dh84,900) into Old Mutual on July 20, it would now be worth in excess of £17,100.

Should I now sell, cut and run? Or was there still time to squeeze yet more juice out of Old Mutual? Maybe, with the assist of the long weekend. So at the close of play on Friday, with my portfolio standing at £15,307.67, I sold my three worst-performing stocks (though even they were doing reasonably well) - United Utilities (up 2 per cent) and Pearson and Sainsbury (both up 5 per cent) - and ploughed the proceeds into Old Mutual.

The result? Within minutes of the market reopening on Tuesday morning, Old Mutual jumped another 6 per cent, to 21 per cent higher than its July 20 price. Even my two remaining minority holdings, Admiral and Vodafone, were refreshed by the long weekend and rose 9 and 13 per cent respectively, altogether boosting the value of my holding to £16,133. What did you do at the weekend? I made £826. By the seat of my pants.

@Email:jgornall@thenational.ae